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Rothschilds Continuation Finance (C.I.) Limited

Report of the Directors and Financial Statements for the 9 months ended 31 December 2017

Report of the Directors

The Directors present their Directors' report and financial statements for the 9 months ended 31 December 2017.

Principal Activities and Business Review

The principal activity of Rothschilds Continuation Finance (C.I.) Limited (the Company) is the raising of finance for the purpose of lending it to other companies, including members of the Rothschild Concordia SAS group. The results for the period are set out in the Statement of Comprehensive Income on page 8. As at 31 December 2017, £125,000,000 perpetual subordinated notes were in issue by the Company.

Rothschild & Co SCA announced on 21 March 2017 that it will change its financial year end from 31 March to 31 December. Rothschilds Continuation Finance (C.I.) Limited has changed its year end in line with this such that this set of financial statements is for the 9 month period ended 31 December 2017. The comparative figures for the Company's income statement, statement of comprehensive income, statement of changes in equity, cash flow statement and related notes are for the 12 months from 1 April 2016 to 31 March 2017.

Principal Risks and Uncertainties

The principal risks of the Company are credit risk, liquidity risk, market risk and operational risk. The Company follows the risk management policies of a fellow Group company N M Rothschild & Sons Limited.

The Company's market risk exposure is limited to interest rate. Exposure to interest rate movements on the perpetual subordinated note issues has been passed to a fellow subsidiary N M Rothschild & Sons Limited ("NMR") and parent undertaking Rothschilds Continuation Limited ("RCL"), as the issue proceeds have been on-lent to NMR and RCL at a fixed margin of 1/64 per cent above the rate being paid.

Liquidity risk has similarly been transferred to NMR and RCL as the funds on-lent have the same maturity dates as the notes issued. The Company's principal credit risk is with NMR and RCL.

Since notes issued by the Company have been guaranteed by, and funds have been on-lent to, NMR and RCL, the Company's ability to meet its obligations in respect of notes issued by it is affected by NMR's and RCL's ability to make payments to the Company.

Currency risk is not considered significant as all material foreign currency balances and cash flows are matched.

Operational risk arising from inadequate or failed internal processes, people and systems or from external events is managed by maintaining a strong framework of internal controls.

Directors

The Directors who held office during the period were as follows:

Peter Barbour

Anthony Coghlan

Mark Crump

David Oxburgh

Directors' Indemnity

The Company has provided qualifying third-party indemnities for the benefit of its Directors. These were provided during the period and remain in force at the date of this report.

Dividends

During the period, the Company paid dividends of £150,000 (year ended 31 March 2017: £nil).

Auditor

Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.

Audit Information

The Directors who held office at the date of approval of this Report of the Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware, and each Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.

Directors' Responsibilities Statement

The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and applicable law.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing these financial statements, the Directors are required to:

· select suitable accounting policies and then apply them consistently;

· make judgements and estimates that are reasonable and prudent;

· state whether they have been prepared in accordance with IFRS as adopted by the EU;

· assess the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

By Order of the Board

Anthony Coghlan Peter Barbour

Director Director

27 March 2018

Independent Auditor's Report to the Members of Rothschilds Continuation Finance (C.I.) Limited

1. Our opinion is unmodified

We have audited the financial statements of Rothschilds Continuation Finance (C.I.) Limited ("the Company") for the 9 months ended 31 December 2017 which comprise the Company primary statements and the related notes, including the accounting policies in note 1.

In our opinion:

· the financial statements give a true and fair view of the state of the Company's affairs as at 31 December 2017 and of the Company's profit for the period then ended;

· the Company financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);

· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to those charged with governance.

We were appointed as auditor by the directors on 31 March 1994. The period of total uninterrupted engagement is the 23 years ended 31 December 2017. We have fulfilled our ethical responsibilities under, and we remain independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non-audit services prohibited by that standard were provided.

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. We summarise below the key audit matter (unchanged from March 2017), in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. These matters were addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on these matters.

3. Our application of materiality and an overview of the scope of our audit

Materiality for the financial statements for the period ending 31 December 2017 was set at £1.35m (31 March 2017: £1.26m), determined with reference to a benchmark of total assets (of which it represents 1% (31 March 2017: 1%).

4. We have nothing to report on going concern

We are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least twelve months from the date of approval of the financial statements. We have nothing to report in these respects.

5. We have nothing to report the other information in the financial statements

The directors are responsible for the other information presented in the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Directors' report

Based solely on our work on the other information:

· we have not identified material misstatements in the directors' report;

· in our opinion the information given in the report for the financial period is consistent with the financial statements; and

· in our opinion the report has been prepared in accordance with the Companies Act 2006.

6. We have nothing to report on the other matters on which we are required to report by exception

Under the Companies Act 2006, we are required to report to you if, in our opinion:

· adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or

· the Company financial statements are not in agreement with the accounting records and returns; or

· certain disclosures of directors' remuneration specified by law are not made; or

· we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

7. Respective responsibilities

Directors' responsibilities

As explained more fully in their statement set out on page 3, the Directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or other irregularities (see below), or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC's website at: www.frc.org.uk/auditorsresponsibilities.

Irregularities - ability to detect

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with the directors and other Management (as required by auditing standards).

We had regard to laws and regulations in areas that directly affect the financial statements including financial reporting (including related company legislation) and taxation legislation. We considered the extent of compliance with those laws and regulations as part of our procedures on the related financial statement items.

In addition we considered the impact of laws and regulations recognising the financial nature of the Company's activities and its legal form. With the exception of any known or possible non-compliance, and as required by auditing standards, our work in respect of these was limited to enquiry of the directors and other management and inspection of regulatory and legal correspondence.

We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit. As with any audit, there remained a higher risk of non-detection of non-compliance with relevant laws and regulations irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

8. The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

Pamela McIntyre (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square

London E14 5GL

27 March 2018

Statement of Comprehensive Income

For the 9 months ended 31 December 2017

All amounts are in respect of continuing activities.

Balance Sheet

At 31 December 2017

Approved by the Board of Directors and signed on its behalf on 27 March 2018 by:

Anthony Coghlan Peter Barbour

Director Director

Statement of Changes in Equity

For the 9 months ended 31 December 2017

Cash Flow Statement

For the 9 months ended 31 December 2017

Interest paid and received during the period were as follows :

Notes to the Financial Statements

(forming part of the Financial Statements)

For the 9 months ended 31 December 2017

1. Accounting Policies

Rothschilds Continuation Finance (C.I.) Limited ("the Company") is a private limited company incorporated in Guernsey. The principal accounting policies which have been consistently adopted in the presentation of the financial statements are as follows:

a. Basis of preparation

The financial statements are prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations, endorsed by the European Union ("EU") and with those requirements of the Companies (Guernsey) Law 2008 applicable to companies reporting under IFRS. The financial statements are prepared under the historical cost accounting rules and presented in its sterling, unless otherwise stated. The maturities of the Company's liabilities are matched with the maturities of its assets. There is, therefore a strong expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and accordingly, the financial statements have been prepared on a going concern basis.The financial statements are presented in sterling, unless otherwise stated.

Standards affecting the financial statements

There were no new standards or amendments to standards that have been applied in the financial statements for the 9 months ended 31 December 2017.

Future accounting developments

A number of new standards, amendments to standards and interpretations are effective for accounting periods ending after 31 December 2017 and therefore have not been applied in preparing these financial statements. None of these are expected to have a significant effect on the financial statements of the Company.

Accounting standards first effective for accounting periods beginning on or after 1 January 2018

IFRS 9 Financial Instruments, which replaces IAS 39 Financial Instruments: Recognition and Measurement and includes revised guidance in respect of the classification and measurement of financial assets and liabilities and introduces additional requirements for liabilities and hedge accounting as well as a new expected credit loss model for calculating impairment on financial assets. This new standard is not expected to have a material impact on the Company.

b. Interest receivable and payable

Interest is recognised in the statement of comprehensive income using the effective interest rate method.

c. Taxation

Tax payable on profits is recognised in the statement of comprehensive income.

d. Cash and cash equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise balances with other group companies that are readily convertible to cash and are subject to an insignificant risk of changes in value.

e. Capital management

The Company is not subject to any externally imposed capital requirements. It is dependent on Rothschilds Continuation Limited (the parent undertaking) to provide capital resources which are therefore managed on a group basis.

f. Financial assets and liabilities

Financial assets and liabilities are recognised on trade date and derecognised on either trade date, if applicable, or on maturity or repayment.

On initial recognition, IAS 39 requires that financial assets be classified into the following categories; at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available for sale investments. The company does not hold any assets that are classified as held-to-maturity or available for sale.

Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Loans and advances are intitially recorded at fair value, including any transaction costs and are subsequently measured at amortised cost using the effective interest rate method. Gains and losses arising on derecognition of loans and advances are recognised in other operating income.

g. Accounting Judgements and estimates

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the accounting policies.

2. Financial Risk Management 

The Company follows the financial risk management policies of the parent undertaking, Rothschilds Continuation Limited. The key risks arising from the Company's activities involving financial instruments, which are monitored at the group level, are as follows:

- Credit risk - the risk of loss arising from client or counterparty default is not considered a significant risk to the Company as all asset balances are with other group companies as detailed in note 12 Related Party Transactions.

- Market risk - exposure to changes in market variables such as interest rates, currency exchange rates, equity and debt prices is not considered significant as the terms of financial assets substantially match those of financial liabilities.

- Liquidity risk - the risk that the Company is unable to meet its obligations as they fall due or that it is unable to fund its commitments is not considered significant as material cash inflows and outflows from financial assets and liabilities are substantially matched.

3. Directors' Emoluments 

None of the Directors received any remuneration in respect of their services to the Company during the period (year to 31 March 2017: £nil).

4. Audit Fee

The amount receivable by the auditors and their associates in respect of the audit of these financial statements is £5,000 (year to 31 March 2017: £3,511). The audit fee is paid on a group basis by N M Rothschild & Sons Limited.

5. Taxation

6. Loans to Group Undertakings

The interest rate charged on the subordinated perpetual loans to group undertakings is 9 1/64 per cent. The fair value of the loans was £160,125,000 as at 31 December 2017 (at 31 March 2017: £157,312,500). The fair value was estimated using market price at the balance sheet date for similar instruments (level 2) .

7. Other Financial Assets

8. Cash and Cash Equivalents

At the period end the Company held cash of £3,465,064 (at 31 March 2017: £265,660) at a fellow subsidiary undertaking.

9. Other Financial Liabilities

Interest payable on the subordinated guaranteed notes is fixed at 9 per cent.

10. Subordinated Guaranteed Notes

The fair value of the subordinated guaranteed notes was £160,000,000 as at 31 December 2017 (at 31 March 2017: £157,187,500). The fair value was estimated using market price at the balance sheet date (level 1).

The following table shows contractual cash flows payable by the Company on the subordinated guaranteed notes, analysed by remaining contractual maturity at the balance sheet date. Interest cash flows on the loan are shown up to five years only, with the prinicipal balance being shown in the > 5yr column.

11. Share Capital

12. Related Party Transactions

Parties are considered related if one party controls, is controlled by or has the ability to exercise significant influence over the other party. This includes key management personnel, the parent company, subsidiaries and fellow subsidiaries.

Amounts receivable from related parties at the period end were as follows:

Amounts recognised in the statement of comprehensive income in respect of related party transactions were as follows:

Amounts recognised directly in equity in respect of related party transactions were as follows:

There were no loans made to Directors during the period (year to 31 March 2017: none) and no balances outstanding at the period end (at 31 March 2017: £nil). There were no employees of the Company during the period (year to 31 March 2017: none).

13. Parent Undertaking and Ultimate Holding Company

The largest group in which the results of the Company are consolidated is that headed by Rothschild Concordia SAS, incorporated in France, and whose registered office is at 23bis, Avenue de Messine, 75008 Paris. The smallest group in which they are consolidated is that headed by Rothschild & Co SCA, a French public limited partnership whose registered office is also at 23bis, Avenue de Messine, 75008 Paris. The accounts are available on Rothschild & Co website at www.rothschildandco.com.

The Company's immediate parent company is Rothschilds Continuation Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithins Lane, London EC4N 8AL.

The Company's registered office is located at St Julian's Court, St Peter Port, Guernsey, GY1 3BP.